Feds Question Herbalife About Business Practices

Herbalife, a global nutrition and weight management company whose products are sold by nearly 2.3 million independent distributors, is facing scrutiny by federal law enforcement about their business practices. According to CNBC, the company has been asked to produce information about the activities of about 10 senior Herbalife members.

It’s unclear exactly what law enforcement asked for, or the identities of the specific members in question.

Sources say the company has offered the members assistance in obtaining legal counsel though it’s unclear how many have sought representation.

When asked for a comment on Sunday evening Herbalife spokesman Alan Hoffman provided CNBC the following statement:

“Bill Ackman has been engaged in a nearly three-year effort to drive down Herbalife’s stock in order to enrich himself and his investors. There is reportedly an ongoing federal criminal investigation into his campaign against Herbalife for stock manipulation and law enforcement and regulators have recently sought information from Herbalife and others relating to that investigation as well as trading in Herbalife shares and allegations about our business practices. We are cooperating with these requests for information, remain confident in the integrity of our business practices, and are hopeful Ackman’s long-term campaign of distortion will be found to be illegal.”

Separately, Herbalife has also received inquiries recently about irregular trading in its stock as part of a broader investigation into possible market manipulation.

A recent lawsuit led by two pension funds with stakes in Herbalife alleged the company violated federal securities law by misrepresenting the “nature, scope and legality of business and operations.” It was dismissed by U.S. District Court in Los Angeles March 18 on the grounds that arguments it was a pyramid scheme were “unpersuasive.”